By JANE HADLEY, SEATTLE POST-INTELLIGENCER REPORTER

Published 10:00 pm, Thursday, November 17, 2005

Sound Transit is adopting some monoraillike financial techniques to pay for extending its light rail line from Westlake Center to Husky Stadium.

But Brian McCartan, Sound Transit's deputy chief finance officer, said the agency's looser financial policies won't be anywhere close to what the monorail proposed.

The new financial plan calls for 10 years of interest-only payments, compared with the current plan of five years of interest-only payments. Sound Transit also will introduce a "wrap structure" for all of its bonds. The effect, McCartan said, is to push principal repayment further into the future.

These two changes will allow Sound Transit to raise more cash when it needs it. But deferring repayment of principal will result in a 12 percent increase in debt-service costs, McCartan told the agency's finance committee.

The Seattle Monorail Project, which voters killed Nov. 8, began its plunge in popularity when it announced a financing plan in June that totaled $11 billion in capital and finance costs. The financing costs were more than five times the capital cost of the line, a ratio that state Treasurer Mike Murphy lambasted as "ludicrous" and "unconscionable." The ratio of debt service to the cost of the project should be closer to double, Murphy said.

At that time, Sound Transit's debt service on its initial 14-mile light rail line between downtown and Tukwila met that standard.

But as Sound Transit begins to try to pay for the $1.45 billion University Link, the light rail extension to Husky Stadium via Capitol Hill, the agency is being forced to liberalize its financial policies to raise the money needed.

The debt service to capital ratio will increase but still is well within Murphy's standard and well below the monorail project's.

Sound Transit will borrow only about a third of the cost of the line -- $566 million. It will pay $1.25 billion in interest costs attributable to the University Link project. The ratio of debt service -- defined as principle plus interest -- to capital cost is 1.25.

(Editor's Note: The preceding four paragraphs were replaced from the original version of this story in order to clarify financial information.)

The $9 billion monorail debt extended until 2050 and possibly until 2078. And it relied partly on high-interest junk bonds.

McCartan said that for some period of years, the monorail not only was skipping payments on principal but also wasn't paying interest.

McCartan also proposed that Sound Transit lower its "debt coverage ratio" floor from the current 1.3 to 1.15 for the University Link project. That means that Sound Transit's net income could be 115 percent of total operations and debt-service costs, instead of the currently required 130 percent.

The agency is also proposing to delay capital replacement set-asides, but says it would make up for it beginning in 2016, when the line begins operating.

Construction is scheduled to begin in 2008.

The agency has applied to the federal government for a $700 million grant. Sound Transit expects the changes in financial policies and delay in capital replacement to produce $400 million. Tax revenue and bonds would produce another $350 million.